Business

Rates increase 5.8 percent from last year's average

Price of electricity up again this year

ByDAN BARKER Times News Editor

Posted:
03/19/2013 11:10:26 AM MDT

Morgan County Rural Electric Association President Larry Hoozee announced a 5.8 percent average increase in the cost of power from the association during its annual meeting Saturday at Fort Morgan High School.
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The Morgan County Rural Electric Association announced an overall average increase in its rates of 5.8 percent during its 76th annual member meeting Saturday at Fort Morgan High School.

President Larry Hoozee told an audience of members that MCREA power provider Tri-State Generation and Transmission had made a 4.9 percent increase in its wholesale electrical power rate for 2013, which was on top of a 4.8 percent increase in 2012.

Last year, the cooperative had been able to avoid an increase despite the rise in costs, but it could not do that this year after a combined increase of 9.7 percent in the cost of electricity, he said.

Part of that increase came because Tri-State had based its rates on the peak demand charge, which is the maximum level of MCREA's electric use each month.

Beginning this year, it uses an averaging process to calculate the demand, Hoozee said.

Tri-State now charges for the average electrical use each month, not for the association's highest level of use during the month, he said.

That means most of the rate classes that were figured for when electricity was used have become obsolete and discontinued, Hoozee said.

The only good thing about that is that the rate structure is much simpler. Residential users will only see two line items on their bills: a facilities charge and an energy charge, he said, which should give users a better idea of their electrical usage and how much they pay for service.

Treasurer Randy Graff said that as a result of the increase in 2012, MCREA's purchased power costs rose by $1.

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3 million last year. The cost of power is the cooperative's largest expense, making up 65 percent of its operating costs.

Manager of Office Services Robb Shaver said the association's residential sales dropped from $7.55 million in 2011 to $7.7 million last year, which means that category made up 30 percent of the sales. Sales to large and small power remained relatively stable at about 20 percent for large power and 9 percent for small power.

MCREA did have a lower property tax cost, paying $46,000 less than in 2011, Graff said. However, it had seen a nearly $102,000 rise in property taxes during the five previous years.

The cooperative remained in sound financial condition in 2012, with operating revenues of about $25.14 million and costs of $24.62 million, Shaver said.

That left an operating margin of $519,000, he said.

The non-operating margin based on investments and the sales of merchandise totaled $132,000, Shaver said. Capital credits allocated to MCREA from Tri-State and other cooperatives came to $783,000, making a net margin of $1.54 million.

Margins are returned to association members. In December, MCREA issued capital credits to its members totaling $600,000. This retires the 1992 and part of the 1993 generation and transmission margin allocations, Graff said. That means checks were sent out to members who consumed power during those years.

Jim Spiers, senior vice president of business strategy, research and development for Tri-State, came to the meeting to explain how it operated last year.

He noted that Tri-State is a conglomeration of 44 cooperatives such as MCREA, and each cooperative has a representative on its board.

Those representatives are vigilant in making sure Tri-State provides reliable and affordable energy, Spiers said.

Tri-State faced some challenges, but 2012 was a good year as it added to its assets. It bought a coal mine, which will mean more control over costs in the future, and bought a wind energy farm to acquire alternative energy, he said.

However, Tri-State representatives are not fans of legislative mandates such as those requiring a certain percentage of electrical power come from alternative power sources such as wind or solar power, Spiers said.

He said there is a legislative proposal to increase the requirement to have 10 percent of power come from alternative sources to 30 or 40 percent.

Spiers called that "misguided," and said those costs go to consumers.

He said Tri-State is not opposed to some mandates but wants room to make decisions.

Spiers also said the Environmental Protection Agency may require additional costs, and Tri-State is in a lawsuit with the agency, although he did not say over what.

A voice vote of the membership on hand elected Brian Schlagel in District One, Graff in District Two and Hoozee in District Three to the board of directors for three-year terms by acclamation. A ballot vote was not taken because no one else was running for the board.

In 2012, the cooperative was able to help eight students with scholarships to attend college or line worker trade schools, Hoozee said, and its employees made contributions of time and energy to local economic development organizations, chambers of commerce, service clubs, fire protection and school support organizations.

When a lineman came in contact with a live wire in May, he had severe burns on his right arm and both hands, said General Manager David Frick.

The incident brought a stronger focus on safety, although MCREA has had a solid safety record for many years, he said.

The association also faced a challenge when the Last Chance fire burned 45,000 acres. The blaze took out or seriously damaged more than 200 electric poles, did severe damage around the South Woodrow substation and left 210 users without power, Frick said.

As soon as the "all clear" sounded, MCREA crews went to work and restored power to all but 44 users the first day, he said. Remaining users were brought on line within the next two days.

"In my opinion, the Last Chance fire restoration project is a testament to the level of commitment that Morgan County REA has for our member-owners," Frick said.

Association crews also built 36 miles of new line and retired 27 miles of line, he said. They also inspected all 2,900 miles of lines.

The cooperative added a new substation to the system between New Raymer and Stoneham, Frick said. That is the result of a partnership among MCREA, Tri-State and Williams Midstream. MCREA's part was building about 7.5 miles of transmission line and installing two substation capacitors.

Projects planned for 2013 include rebuilding 4.5 miles of line north of Jackson Lake, rebuilding some lines in Orchard, rebuilding two miles of lines that serve the city of Brush wells, rebuilding six miles of lines that come out of the Hoyt substation, replacing nine miles of line near the Wiggins, Prospect Valley, Gary, Fort Morgan and Orchard areas, improving some tie lines in Wiggins and replacing the underground lines near Wayward Wind.

These things will not happen immediately, but once details are finalized members will be notified, Frick said.

Members attending the meeting won many smaller prizes, and had a chance to win two larger prizes.

Robert Korthuis of Roggen won a $250 prize, but the grand prize of $1,000 was not claimed, since the person whose name was drawn was not present.